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of buying bundles of enterprise features.

That's the word from company executives who met with reporters after Avaya made a fresh start in the UC and collaboration market as a public company. On Wednesday, Avaya celebrated its listing on the New York Stock Exchange by ringing the opening bell, which marked the end of 10 years as a private company.

Avaya plans to make its enterprise products SMB-friendly by carving them into "consumable chunks," which will include Avaya UC, said Mercer Rowe, general manager of Avaya's cloud business. The company is banking on these bundles to help grow the size of its customer base, which tilts to large organizations.

While Avaya readies its products for the SMB market, other vendors are already there with cloud-based phone systems that are attracting the interest of corporations that would have been Avaya candidates.

"Providers like RingCentral and 8x8 have proven that there is a large and growing market for UCaaS [unified communication as a service], and not just among small businesses but larger size organizations as well," said Brian Riggs, an analyst at research and consulting firm Ovum, based in London.

The UCaaS market also includes enterprise suppliers. Microsoft and Cisco, for example, have added IP telephony to Skype for Business and Spark, respectively.

Plans for Avaya UC in the cloud

Avaya's cloud strategy includes its spinoff business, Zang Inc., which provides cloud-based telephony for SMBs and team messaging. Avaya and Zang are working together to build cloud-based applications.

As we go out and we talk to our customers, they're not rushing to the cloud. What they're clamoring for is cloud consumption models.
Mercer Rowegeneral manager, Avaya Cloud

In the near term, the new Avaya plans to increase revenue quickly by selling on-premises Avaya UC and other communication applications. TToday, 85% of Avaya's UC business is non-cloud, and the percentage among contact center customers -- the company's other significant market -- is even higher.

"As we go out and we talk to our customers, they're not rushing to the cloud," Rowe said. "What they're clamoring for is cloud consumption models."

Avaya product pricing

Avaya is chasing that demand by selling its products through a subscription model similar to cloud providers'. Many companies are choosing to buy IT this way to spread out the costs over the lifetime of a multiyear contract, rather than pay for everything at once.

"For new customers, or those who are planning to move to the cloud, going to a subscription model means that they can move to the cloud when ready," said Irwin Lazar, an analyst at Nemertes Research, based in Mokena, Ill. Companies also have the option of sticking with on-premises technology while getting the benefits of a subscription-based pricing model.

Avaya has been increasing the percentage of subscription-driven recurring revenue as a portion of overall sales for several years. More than 80% of Avaya's $3 billion in revenue last year came from software and services, and 60% of that was recurring.

Communication hardware, once Avaya's bread and butter, has taken a backseat. "We've been able to transform the company," company CEO Jim Chirico told reporters.

Avaya channel partners will continue to play a significant role in the company's sales operations, executives said. Avaya will work with partners in streamlining the sales process so pricing on bundles are easy to find and customers can order and purchase them quickly.

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